Car Loans Heading North in India

Saturday 14 June 2008, 00:00 AM by Satish

Hike in rates from the RBI has made car industry glum as the car loan lenders have hiked their car loans interest rates in India. The loans are dearer anywhere between 75 to 100 basis points. This spells into Rs 50 hike in a month on a 5-year loan. The Reserve Bank of India has hiked its short term lending rate to banks by 0.25 percent to 8 percent owing to the rise in inflation in the country.

According to the ICICI bank officials, "We used to lend at rack rates of 15% per annum, we are now been told that the new rates will be 16% effective from Monday." There is also a hike in the processing charged for the car loans. ICICI banks would be charging 2 percent as processing fee instead of earlier 1.5 percent.

"This (repo rate hike) will have an implication on the bank's lending rates. I think the Prime Lending Rates of the banks will go up by about 50 basis points. There would also be a revision of bank's deposit rates," said HDFC Bank Chief Economist Abheek Barua.

Sumit Bali, CEO of Kotak Mahindra Prime, said: "Our new rates will be decided on Wednesday. The broad indication is that the rates would go up by anything between 50 to 75 basis points. Our current rack rate is around 15.75%."